Grain and livestock futures ended mostly lower on Thursday.
Grains Slide on China Summit “Let Down”
Grain futures ended lower with disappointment from the lack of progress and details with the China Summit.
Ted Seifried of Zaner Ag Hedge, the two-month extension of the trade truce to Jan. 10 was the first let down.
However, the failure to see progress on China dropping its 10% reciprocal tariff on grains and soybeans also leaves concerns and questions.
So is this item off the table because it is important for getting private entities to buy U.S. goods instead of just government owned firms.
Seifried says, “I think some people are looking at it that way. I kind of don’t think so. I think that was just something that was set in the groundwork from the trade officials starting Sunday of last week. And again, I think that was just groundwork for the talks that are happening now, right? So I don’t see it that way necessarily, but I do understand that some people in the trade do. And I do think that’s part of the
disappointment that we had on Thursday when we weren’t getting any big news coming out of these meetings.”
Market Wants Details on the $17 Billion
The market wants details, especially of what is included in the additional $17 billion prorated ag purchases beyond soybeans.
Seifried says the market is comfortable China will fulfill the 25 MMT of soybean purchases for 2026/27 they agreed to last October as they are more than halfway on total purchases.
The big question mark he adds is the $17 billion in U.S. ag and ag-related products, not including soybeans.
“Because they’ve not really shown any indication that they’re attempting to do that,” says Seifried, “Yeah, they’ve bought some things, sorghum, some cotton, some pork, probably some timber, but it doesn’t amount to much, maybe $4 billion. Which, by the way, that’s a very small amount compared to what they would usually do in a non-trade war year for things other than soybeans.”
That’s left questions regarding if there was something lost in translation. So he says the market want clarification or some sort of reassurance they’re going to do that and what the terms are.
Purchase Agreement?
Seifried suggests that the market would like to see some type of purchase agreement.
“Like we’re going to buy 15 million metric tons of corn or 10 million metric tons of soybean or of wheat,” he explains.
In reality China is not going to provide those kind of details because it will make the market go up and make those goods more expensive for them to buy.
The exceptions may be soybeans. “Well, they did it with soybeans, right? We’re living that scenario with soybeans right now. And we’re going to do that for the next two years as well, two marketing years.”
He adds that $17 billion is not a volume commitment but a dollar commitment. “They’re okay with higher prices because it gets them closer to
the $17 billion dollars if they’re doing it for political reasons. They would only be doing it for political reasons because if you look at where Chinese corn it is trading at their lows while we’re trading at highs.”
So, even if China were to drop the tariffs it would not make financial sense for them to buy corn.
Market Needs Details to Remain Bullish
Seifried contends the market needs more details to stay bullish or it is vulnerable to a sell off, especially with funds near to record long in corn and the soybean complex.
“Funds are record long and it is the time of year where they don’t really like to be long. They’re familiar with seasonality and how harvest goes and harvest pressure and bushels that are coming to market. So the funds are really, really long. And part of the reason for that is because they’re expecting something positive to come out of this meeting. If something positive doesn’t come out of the meeting or something not positive enough, they could start taking profits,” he explains.
That could happen at a time where your natural seller, the American producer has bushels to sell as it is harvest time.
Harvest has been slow in many areas due to wet weather but he contends the market could see two active sellers at once, which could create a deeper correction.
Conversely with some positive announcements the market could see a rally but may not make higher highs until deeper into the South American growing season with concerns about Super El Nino.
Buy the Rumor, Sell the Fact
So, without a positive China Summit the market could see a buy the rumor, sell the fact type situation.
That has happened in past surrounding these China meetings.
“Funds get long for a reason. And when that reason comes to fruition. They start taking profits. If they were long because they’re looking for a positive outcome from this meeting and it’s not more positive than they were expecting, they could start taking profits even if it is a positive outcome. That’s the concern I have,” he adds.
Exports Weak
The other drag on the grain markets was disappointing exports this week.
Soybean exports were 21.4 million bu, corn at 33 million bu. and wheat at 9.8 million bu.
“And you wonder what that is. I mean, you look at where prices are and, okay, so we’re not shooting new highs every day like we had been, you know, all through the month of August, but we are at some relatively high prices. And it really makes you wonder if global end users are taking a little bit of a backseat now at these higher prices, thinking, hey, you know, harvest is coming up, harvest pressure, normal seasonality could put pressure on these markets. And if we wait a few weeks, maybe we can buy cheaper,” he states.
Plus with the dollar at 2.5 month highs that is also a head wind.
Black Sea Cease Fire
The corn and wheat markets have also been lulled into thinking there may be some sort of a ceasefire in the Black Sea and winter wheat futures moved to new lows for the move as a result.
There is no indication of any change in the war that will help move exports though says Seifried.
“We’ve kind of gotten jaded on the it’s on, it’s off again, you know, ceasefire or not sort of news,” he says.
Technically the market is also breaking key support at the top of the upward trending channel the market has been in for several months.
Winter Wheat Acres Up
The other drag on wheat is the market is trying to price in higher acreage, especially with high base price guarantees for crop insurance and the South finally getting some rain.
“Yeah, I think more acres are a very real possibility for wheat.”
The market may also be concerned about higher than expected production in next week’s USDA Small Grains Summary.
market’s wondering if we have a little bit more production on wheat when we look at the small
Corn and Soybeans Hold Support
Corn and soybeans technically are holding support and that is important as the market awaits more details from the China Summit.
“I mean, this area of consolidation, it could either be a bull flag and marking about a halfway point for the next leg higher, or it could be a bigger. broader topping formation. And it’s not coincidental that we are kind of holding in this area as we wait for the details of this meeting, because that’s really going to set the tone for probably between now and the end of the calendar year. So at the moment, it could really go either way,” he says.
Cattle Market Falls on China, ICE Raids
The cattle market may have been caught up in the general nervousness about the China summit but was also concerned about continued ICE raids in southwest Kansas meat packing plants.
The slaughter on Wednesday was only 94,000 head which is a concern because it is disrupting the market.
Seifried says, “It’s been a wild week for the cattle complex, kind of digesting the Cattle on Feed report from last Friday, which was bullish on all metrics. We had a gap higher on Monday, then we had the big reversal on Tuesday lower, big reversal higher on Wednesday, and then really skittish trade on Thursday.”
He says adding to the pressure is fear of the overall broader economy because without a positive outcome to the China meeting there could be a bigger break in the stock market.
“Do we start worrying about spending at the butcher’s counter? And then, yeah, you throw into the mix of that ICE raids and production. So, it’s a big question mark.”
Beef Imports Pulled Back?
Part of the roller coaster has also been reports the Trump administration was going to walk back the increased beef imports, a story they denied.
“The fact of the matter is we are seeing increased imports. We also have higher weights. That’s gone. to some extent, to offset the lower animal numbers out there. And that’s been what the market’s thought or that’s been the thought in the market or the feeling in the market or why we’ve had this like, you know, almost two and a half month correction.”
Yet, he says the record low placements in the last two Cattle on Feed Reports and the fact the market is not seeing that dramatic seasonal uptick for this time of year has the market mentality shifting back to thinking the animals just aren’t there.
Cash Still the Key
Cash could pull the market back higher but he is concerned that with packers not running at full capacity and the ICE raids cutting slaughter they could use that to pressure cash prices.
